If you are transitioning from employee to self-employed, here are a few things to consider before making the plunge from registered chartered accounting firm Drumm Nevatt & Associates.
There is a lot to like about going solo, you have complete control your business, you get to follow your passion, and keep all the profits. However, it does come with a whole heap of accountability, that only you are responsible for.
Before you start make sure you have a sound understanding of why you want to be self-employed and what you want to get out of it. It is a good idea to talk to business advisors, lawyers, accountants, or anyone who specialises in your industry, so you have a better understanding of what new responsibilities you will be taking on.
Once you a ready to push the go button on your business you will need to check off the following list to become a sole trader:
- Government licences and permits your business needs.
- Qualifications or registrations for your trade or profession.
Additionally, if you expect to earn over $60,000 a year, you have to tell Inland Revenue you’ve become a sole trader as you will be required to register for GST.
You can also get a New Zealand Business Number (NZBN). Having a New Zealand business can expedite dealings with government, suppliers and customers, and other businesses. Get one here.
When you’re self-employed, you need to make sure that you are taking care of your taxes, which can be overwhelming especially if you are new at it. You will use your individual IRD number to pay tax on net profit by filing an individual income return.
Expenses related to being self-employed are tax-deductible, so you can subtract them from your income and lower your taxable income.
When you are self-employed KiwiSaver can still be right for you. “We see too many entrepreneurs disregard KiwiSaver as they don’t get the employer contribution. But being self-employed, you decide how much you put in,” says Craig Nevatt, Director at Drumm Nevatt & Associates. You will still receive any market returns from your KiwiSaver money being invested.
You can also still get five hundred dollars contribution from the government into your KiwiSaver each year. The government will match 50 cents for every dollar you put in, up to $521 every year. So it’s worth putting in at least $20 a week.
It is an exciting adventure to become self-employed, but there is a lot to consider and tasks to complete. If you need a little bit of guidance for your new business, contact the friendly team at Drumm Nevatt & Associates. They are highly skilled and trained in all aspects of business accounting and taxation. They can provide specialist financial advice tailored to your business.
Contact Drumm Nevatt & Associates for all your business development, bookkeeping and accounting needs.
Phone: 64 9 534 4382
Address: 23 Myres Street Tauranga
Phone: 0274 587 724